Facebook, Inc. (NASDAQ:FB)

CAPS Rating: 2 out of 5


Player Avatar Acolin (47.58) Submitted: 12/31/2012 5:47:43 PM : Outperform Start Price: $24.92 FB Score: +187.37

With measly earnings of only $.19 per share, Facebook (NASDAQ: FB) trades at an astounding P/E ratio of 136! Price/Sales (ttm) ratio is lofty 12, while Price/Book (mrq) ratio is a rich four. Revenues are less than $5B.
FB is a high-tech company. It is more than just a software developer. It is actually a platform provider. It not only provides social media software with its extremely popular site, but also hardware with its data server centers. Yet for a high-tech company, its profit margins are a slim six percent.
What could make this new IPO so incredibly valuable? With those ratios, either FB has to earn ten times more or the stock has to increase ten-fold in the next decade to trade at the same levels as most other major stocks.

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